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One of the contentious issues in electricity reform is whether there are significant gains from restructuring systems that are moderately well run. South Africa's electricity system is a case in point. The sector's state-owned utility, Eskom, has been generating some of the lowest-priced electricity in the world, has largely achieved revenue adequacy, and has financed the bulk of the government's ambitious electrification program. Moreover, the key technical performance indicators of Eskom's generation plants have reached world-class levels. Yet the sector is confronted today with serious challenges. South Africa's electricity system is currently facing a tight demand/supply balance, and the distribution segment of the industry is in serious financial trouble. This paper provides a careful diagnostic assessment of the industry and identifies a range of policy and restructuring options to improve its performance. It suggests removing distribution from municipal control and privatizing it, calls for vertical and horizontal unbundling, and argues that the cost-benefit analysis of different structural options should focus on investment incentives and not just current operating efficiency.

Balance --- Coal --- Coal Reserves --- Distribution Facilities --- E-Business --- Electricity --- Electricity Distribution --- Electricity Supply --- Electricity System --- Electricity Utilities --- Electrification --- Energy --- Energy Production and Transportation --- Environmental Performance --- Generation --- Investment --- Options --- Power --- Power Plant --- Power Plant Construction --- Power Sector --- Price --- Primary Energy --- Private Sector Development

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Auctions --- Commodity exchanges --- Electric utilities

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Cities are among the world's largest consumersof electric energy, accountable for two-thirdsof total electricity consumption and for over 70 percent of global greenhouse gases emissions. Publicstreet lighting systems contribute significantly toa city's energy consumption. In Brazil, the cost of energy for public lighting already represents thesecond most expensive item of most municipalities' budgets, surpassed only by payroll expenditures.Furthermore, new regulations require all themunicipalities to own the city's public lightingassets, making public lighting one of the few sectors in which local authorities have direct control over energy-consuming assets (contrastedwith other high energy-consuming sectors such as transport). As a result, the local authorities willhave every incentive to invest in and implementlighting projects by themselves.In Brazil, the current public street lighting inventory primarily consists of mercury and HPS lamps, which over time will tend to be replaced by more efficient technologies such as Light-Emitting Diodes (LEDs). This new technology is already in operation in some major cities in other countries. The availability and increasing spread of LED technology offers a unique opportunity for Brazilian cities to reduce their energy consumption. This is especially important and beneficial to cities, considering the sharp increase in energy prices in recent years.In spite of the substantial benefits associated with the conversion of the installed public lighting network in Brazilian cities, major economic financial and institutional obstacles still need to be overcome.In order to reap the benefits of conversion to LED,it is necessary to design and implement business models that can enable the necessary investments.These business models must take into account the diversity of Brazil's municipalities. Furthermore,consideration must be given to designing financial solutions that can raise private sector capital while mitigating municipal credit and project performance risks.

Climate Change Mitigation and Green House Gases --- Energy --- Energy and Environment --- Energy Policies and Economics --- Environment --- Finance and Financial Sector Development --- Municipal Financial Management --- Public and Municipal Finance --- Urban Development --- Urban Economics